Filing, Withdrawing, and Managing IRS Authorizations

Clients need their CPA to
have the appropriate authorization to communicate
with the IRS on their behalf. Whether they are
selected for an audit, assessed a large penalty, or
simply need a transcript to determine what payments
were made this tax year, clients rely on CPAs to
address their tax issues. Most practitioners
regularly use a power of attorney (Form 2848, Power
of Attorney and Declaration of
Representative) to represent their clients.
However, other types of IRS authorizations have
practical uses. And, at times, it may make sense to
obtain more than one type of authorization.

Form 8821

Form
8821, Tax
Information Authorization, is used to
obtain taxpayer information. It does not hold the
same weight as Form 2848 (i.e., Form 8821 does not
allow a practitioner to represent a client in any
way). However, if a practitioner has this type of
authorization, he or she is equipped with the tool
to call the IRS and obtain information such as
client transcripts, payments made on the account,
filing status, and more.

A
benefit of a Form 8821 authorization is the ability
to use less-expensive
staff to call the IRS and obtain IRS account
information. If a practitioner lists his or her
firm's name as the appointee on Form 8821, anyone
from the firm may call the IRS and obtain
information about the taxpayer. For example, the
firm's secretary or bookkeeper, instead of the tax
manager or partner, could call the IRS to obtain a
client's transcript. Considering that
call-wait times have
increased steadily in line with recent cuts to the
IRS's budget, using less costly staff to make basic
IRS phone calls can be beneficial.

Additionally, as a proactive measure,
practitioners should consider having a Form 8821 on
file for all clients (even clients that do not
currently have any tax issues). This is because Form
8821 allows the appointee to be copied on all IRS
correspondence. The appointee will then receive a
copy of a client's notice at the same time as the
client—allowing the practitioner the opportunity to
determine how the client should address the matter.
After all, sometimes clients ignore an IRS notice or
do not understand its severity.

Checkbox Authorization (Third-Party
Designee)

A CPA can complete the "Third
Party Designee" section on a client's Form
1040, U.S.
Individual Income Tax Return (often
referred to as "checkbox authority"). This
allows the CPA to discuss the processing of the
client's tax return, including the status of tax
refunds. This authorization has limited use but may
be worthwhile to ensure a return is correctly
processed.

How to
Complete Forms 2848 and 8821

Completing
Forms 2848 and 8821 is fairly straightforward. A
practitioner needs to have:

Tax information (type of tax, tax form number,
years or periods, and specific tax matters, if
applicable).

A practitioner will
need to enter a CAF number to complete the forms. A
CAF number is a unique
nine-digit identification
number assigned to a practitioner the first time he
or she files an authorization form with the IRS. A
CAF number is different from a Social Security
number, employer identification number, or
PTIN.

CAF Number
Tips

If practitioners do not have a
CAF number, they may enter "none" in the
CAF number section on the form, and the IRS will
assign one.

If practitioners forget
their CAF number, they may call the Practitioner
Priority Service line at 866-860-4259866-860-4259 FREE.
Once authenticating information is provided, the
IRS representative can usually provide the CAF
number over the phone.

Where to File Forms 2848 and 8821

Practitioners must mail or fax their
authorization forms to the applicable CAF unit
(Ogden, Utah; Memphis, Tenn.; or Philadelphia)
unless they check the box on line 4 of Form 2848 or
8821 (specific use not recorded on the CAF). In that
case, the practitioners would mail or fax the form
to the office handling the matter.

Unfortunately, with the retirement of the online
Disclosure Authorization product in 2013 (which
allowed practitioners to file Forms 2848 and 8821
electronically), mailing or faxing these forms are
the only filing options.

Tip: If a client has an
urgent issue and the practitioner does not have time
to wait for the authorization to be recorded at the
CAF unit, the practitioner may call the IRS and scan
and fax the authorization form to the agent who
takes the call.

Withdrawing Form 2848 or 8821
Authorization

Practitioners may withdraw an
authorization at any time. To do so, they must write
"WITHDRAW" across the top of the first
page of the Form 2848 or 8821 with a current
signature and date below the annotation. Then they
must provide a copy of the authorization form with
the withdrawal annotation to the same CAF unit where
the form was originally filed. The instructions to
Form 2848 provide additional steps to take if
practitioners do not have a copy of the
authorization form. A taxpayer may also revoke the
authorization at any time by following procedures
similar to the withdrawal steps.

A new authorization supersedes an existing
authorization unless otherwise specified on Form
2848 or 8821. Authorizations also expire with the
taxpayer's death (proof of death is required).

Obtaining a Listing of All
Authorizations on File With the CAF Unit

It
is advisable to keep a list of all client
authorizations that a practitioner has open with the
IRS. But, at times, a practitioner may need to
obtain that list from the IRS. For example, a
retiring CPA may wish to withdraw all authorizations
on file with the CAF unit. To do so, the CPA may
first make a Freedom of Information Act (FOIA)
request for a CAF representative/client listing.
This is known as a "CAF77 request." A
sample FOIA CAF77 letter is shown on the IRS's FOIA
Guidelines webpage.

The IRS will then provide a printout or
electronic copy of all of the CPA's current
authorizations. The CPA can send a signed withdrawal
request for all authorizations. The CAF unit will
then delete the authorizations attached to
that CPA.

Other
Resources

For additional guidance on IRS
authorizations, refer to the following
resources:

Publication
4019,Third
Party Authorization, Levels of Authority:
This publication provides a nice summary chart of
various types of authorizations (purpose, how
authority is granted, etc.).

Publication 947,
Practice Before the IRS and Power of
Attorney: This 19-page publication provides
information about practicing before the IRS.

Form 56,
Notice Concerning Fiduciary Relationship:
This form is used to authorize the designated
person to perform any act on the taxpayer's behalf
(i.e., he or she is a fiduciary under Sec. 6036 or
6903).

Internal Revenue Manual
(IRM) Section 21.3.7,
Processing Third Party Authorizations Onto the
Centralized Authorization File: This IRM
section applies to IRS employees responsible for
performing CAF account work, but the information
may also be useful to tax practitioners to
understand the IRS's procedures.

Contributor

Valrie
Chambers is an associate professor of
accounting at Stetson University in
Celebration, Fla. Susan
Allen is a lead technical manager
with the AICPA Tax Division and is a staff
liaison to the AICPA Tax Practice &
Procedures Committee. For more information
about this column, contact Prof. Chambers at
valrie.chambers@stetson.edu.

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